Marijuana sales passed a quiet milestone in Washington state in the first three months of 2016.
For the first time, residents and visitors as a whole spent more on cannabis products than on hard alcohol, based on an analysis of purchase and tax records from two state agencies.
In the first quarter of 2016, people spent $19.1 million more on marijuana than spirits, which includes the cost of the products and its associated taxes. By the second quarter, that gap increased to $52.3 million. Those amounts include taxes levied by the state on those products. Spirits sales do not include wine and beer. Marijuana sales include all cannabis products but not paraphernalia.
In July, the state shuttered medical marijuana shops, making all sales go through licensed recreational marijuana storefronts. Sales at retail pot shops shot up by almost $100 million in the third quarter of the year, to $398.2 million.
Third-quarter figures for spirits, including sales directly to customers and to bars and restaurants, won’t be released until early next year.
Industry leaders say the retail cannabis industry only has room to grow in Washington state.
Tacoma opened up its market earlier this year when the City Council changed code to allow up to 16 storefronts within the city limits, while closing all medical shops.
Vicki Christophersen, a lobbyist for the marijuana industry who heads the Washington CannaBusiness Association, said the increasing revenues for marijuana shops show the regulated marketplace is effectively competing against the black market.
“We wouldn’t be selling to that level if we weren’t,” Christophersen said. The price of products on store shelves now, despite the tax, “are competitive with what we thought the black market was at one point.”
Pot bans could fall as taxes lure
Several dozen cities and counties statewide continue to have either an outright ban on marijuana storefronts or have put a pause on their inclusion while councils and commissions consider cannabis rules.
Some cities banned the stores until they could see how the state operated them and what image they would present, said Jim Doherty, a legal consultant with Municipal Research and Services Center, a nonprofit that provides policy guidance for local governments.
“I think some people were afraid these stores would open and there’d be these long-haired people hanging around in vans,” Doherty said. “People have gotten used to the idea that these look like retail stores now.”
And since the Legislature changed how taxes work for marijuana, which allocates $6 million per fiscal year disbursed among the cities and counties that allow stores in their boundaries, Doherty said some jurisdictions may soften their stance by the lure of extra money.
Washington state’s taxes on cannabis and spirits are the highest in the nation, according to the Tax Foundation, a nonprofit tax policy think tank. Retail marijuana sales include a 37 percent tax on marijuana products at the register.
Spirits buyers face sales tax and liter tax. For consumers, that’s a 20.5 percent sales tax and $3.77 per liter. For restaurants and bars, it’s a 13.7 percent sales tax and $2.44 per liter.
David Ozgo, chief economist for the Distilled Spirits Council of the United States, said he’s pleased taxes for marijuana have risen above spirits, but would have preferred for a different reason.
“The real crime is the tax burden that spirits consumers continue to pay,” Ozgo said. “It’s the highest (spirits) tax in the country by far.”
Ozgo said spirits retailers have not seen a drop in sales volume since marijuana was legalized.
“In fact, the growth rate is at or equal to the national average over the last couple of years,” in Washington, he said. In other states with legal weed, “really it’s been a non-issue.”
A recent state revenue forecast shows the state expects to collect nearly $1.3 billion in taxes from the 2014 start of legal marijuana through mid-2019.
The city of Tacoma expects to rake in almost half a million dollars through the 12 months ending July 2017, said Maria Lee, a city spokeswoman.
The only other city earning more tax money is Vancouver near the Oregon border at $524,764, state records show. Tacoma will receive more tax money than even Seattle, which is slated to receive nearly $375,000, according to the Liquor and Cannabis Board.